Local Tax Exemptions at Risk: Boston, Cleveland, Pittsburgh, and British Columbia

Local governments facing financial pressure from shrinking tax revenues because of the economic downturn are with increasing frequency looking to tax-exempt nonprofits for financial support.  Some of the most recent developments include:

Boston:  Boston City Councilor and PILOT Task Force member Steve Murphy is cited in the Jamaica Plain Gazetteas saying he expects a big next year increase from the current $15 million PILOT (payments-in-lieu-of-taxes) from Boston colleges, universities, and other nonprofit organizations.  The Task Force is working both to standardize the amounts of PILOT payments based on not only on property owned but also on community benefits provided as well as to increase the total amount of PILOT paid.  It is not clear, however, how the Task Force will sell its plan given that the city cannot legally require any PILOT deals and so must rely on political pressure and the goodwill of the nonprofits targeted.

Cleveland:  Consultants hired by the City of Cleveland have proposed imposing an annual fee on nonprofit organizations, including hospitals, universities, and museums, according to the Cleveland Plain Dealer.  Cleveland Mayor Frank Jackson appeared wary of the idea, however, saying only that he was open to it but refusing to commit to supporting it.  Not surprisingly, representatives of local nonprofits that provided comments expressed concern about the fairness and wisdom of such a fee given the jobs and other benefits Cleveland’s many nonprofits, including the well-known Cleveland Clinic, provide.

Pittsburgh:  Just days after Allegheny County Executive Dan Onorato vetoeda bill that would have imposed county fees on nonprofits other than churches and schools, the Pittsburgh Post-Gazettereports that Pittsburgh Mayor Luke Ravenstahl plans to propose a 1 percent college-education privilege tax.  It is estimated tax would raise approximately $16 million a year and presumably would at least partially replace voluntary payments from the Pittsburgh Service Fund, an umbrella group of tax-exempt institutions.  The Fund donated $14 million to the city from 2005 through 2007, but then only offered %5.5 million for 2008 through 2010, which the city rejected.  The proposal has, however, run into troublewith the Intergovernmental Cooperation Authority that must approve city budgets, which is apparently questioning the ability of the city to collect such a tax in the next budget year given anticipated legal challenges.

British Columbia:  These developments are not limited to the United States.  In British Columbia, the District of Sechelt Council voted to taxhalf of Camp Olave, a property owned by Girl Guides of Canada (Canada’s equivalent of the Girl Scouts).  The property had been completely tax-exempt before the vote, which it is estimated will result in a more than C$100,000 tax bill in 2010.  As the camp only has an operating budget of $250,000, the Girl Guides have stated that it will likely have to sell the camp.  The tax bill is so high apparently because the waterfront property on which the camp rests has been assessed at C$26 million.  In supporting the Council’s decision, Sechelt Mayor Darren Inkster stated that compared to other, similar-sized municipalities his town has an above-average level of nonprofits with tax exemptions.

LHM